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FTC cracks down on social media influencers

The Federal Trade Commission has been actively sending letters to social media influencers reminding them to disclose compensation in an effort to crack down on what it has deemed as deceptive marketing practices.

Pretty Little Liars actress Lucy Hale was among the influencers who received a warning letter from the FTC - Instagram @lucyhaleIn September, the Federal Trade Commission (FTC) sent warning letters to 21 influencers, including Naomi Campbell and Lucy Hale.

Hale received her FTC letter due to an endorsement of LVMH's Veuve Clicquot polo classic on Instagram. Veuve Clicquot allegedly hired the actress to pose with a Fendi bag which the company had also sent her, although the brand claims that she was under no obligation to pose with it. The bag featured in the post which was captioned "Beautiful day in Jersey overlooking NYC for the [Veuve Clicquot Classic]." Hale removed the post after receiving the letter from the FTC.

FTC attorney Michael Ostheimer said, "There are tons and tons of endorsements out there. Some people are making adequate disclosures. Some are not.”

Typical posts signaling red flags include those where an influencer captions a photo featuring a product with "thank you" with little further disclosure about the relationship between the brand and influencer. Influencers must disclose when they are given free or discounted product which they then post about.

The FTC outlines specific guidelines that influencers must follow. Deceptive practices include crafting a content-heavy caption where users have to click "more" to scroll through the whole post, only to find a hidden note about sponsorship buried at the end.

A disclosure of being compensated for a post must therefore appear in the first few lines of an Instagram caption. The same guidelines must be followed in Snapchat, and a text disclosure must appear in Instagram stories since many users watch stories on mute.

The FTC writes in its letter that, "Knowing the connection [between brand and influencer] is important information for anyone evaluating the endorsement."

Suggested captions that are FTC-compliant include adding #ad or #sponsored up front in the comments. The hashtag "ambassador" is considered too vague, as it is unclear whether the person is being paid or not.

Companies are responsible for monitoring their affiliate marketing networks and influencer posts, and the FTC has the authority to make influencers give up the compensation they receive when they do not properly disclose an endorsement relationship.